PRESENTS SBA 504 Loan Program Financing Green Energy

PRESENTS SBA 504 Loan Program Financing Green Energy Projects for Hawaii’s Businesses Rebuilt Hawaii Consortium - April 5, 2011

HEDCO LDC Ø Established in 1981, HEDCO LDC is a non-profit community-based company certified by the SBA to make loans under its 504 loan program Ø Service the State of Hawaii, Guam and other areas of the South Pacific Ø Partners with a third-party lender to finance the project SBA 504 Loan Program Created in October 1980 by the Small Business Investment Act to: Ø Stimulate economic development via job creation, business growth and increased tax revenues Ø Provide financing to small businesses who are ready to expand need funds to purchase real estate or capital assets 504 loans are funded through the sale of debentures to the private capital markets

Basic Program Eligibility Requirements Ø For-profit entity Ø Owner-user (exception may apply for PPA equipment and energy farms) Ø Tangible Net Worth of $15 million or less Avg. After-Tax Profit of $5 million or less (most current 2 yrs. ) Ø 10 year minimum useful life Ø Other requirements apply Eligible Funding Purposes Ø Green energy projects Ø Ø o Renewable energy (i. e. PV systems, energy farms, geothermal, wind, LEED, etc. ) o Reduces energy consumption by at least 10% Acquisition of commercial property; land, building, or office(s) Construction of new building Acquisition and installation of plant, machinery and equipment Renovation/expansion/conversion of existing commercial building (incl. leasehold properties. Lease term must be equal to or longer than the term of the 504 loan at the time of funding) Ø Debt refinance – meets SBA eligibility requirements Ø Marine facility; including fishing & commercial boats Ø Soft costs associated with the subject project

504 Loan Lending Limits and Fees Lending Limit for 504 Loan Portion Only Ø Minimum: $25, 000 ($62, 500 project size) Ø Maximum: $5 million: all eligible projects or $5. 5 million: per project for energy reduction (10%+), renewable energy /fuels, and manufacturers Borrower’s Fees (included in 504 loan) One-time up front fees (included in the gross debenture): Ø Funding fee. 25% of net 504 loan amount Ø Underwriting fee. 40% of net 504 loan amount Ø Processing fee 1. 50% of net 504 loan amount Monthly fees loan servicing fees (included in monthly loan payments): Ø HEDCO LDC. 625% of gross 504 loan amount Ø Colson -Servicing Agent. 100% of gross 504 loan amount Ø SBA annual fee. 749% of gross 504 loan amount A. 5% lender’s fees applies to the third-party lender *

How Does the 504 Loan program Work for PV Systems? Financing Structure (% of total project cost) Source Borrower HEDCO LC Lender Standard 10% 40% 50% Type 2 (new business) 15% 35% 50% Project cost may include all cost associated with the purchase, transportation, dismantling and installation of machinery/ equipment. Financing structure may differ for commercial property acquisitions * Equipment for PPAs may be eligible for 504 loan financing. _________________________________ Ø The lender initially finances up to 90% of the project cost. Lender provides interim financing for the SBA 504 Loan portion For 20 -year term 504 loan: Lender’s term must be at least 10 years. For 10 -year term 504 loan: Lender’s term must be at least 7 years. Ø Ø HEDCO LDC will take out the 40% of the interim facility with the SBA 504 loan when the project is completed, and all required inspections and certifications are completed Lender takes senior lien and SBA takes a junior lien position on the PV system

Benefits of a 504 Loan for the Business Ø Save money o Low down payments (as low as 10%) o Energy cost reduction o Competitive interest rates Ø Manage expenses better and minimize interest rate risk o Long-term with competitive fixed rate - 10 or 20 year fully amortized loan terms. o Monthly payment never increases over the life of the loan Ø Debt Refinance – existing debt that meets SBA requirements Ø HEDCO LDC support – subsidizes up to $10, 000 or 1% of the debenture amount whichever is less for soft cost such as title and recording fees, attorney fees, etc. related to the 504 loan Ø Exceptional Local Customer Service

Example #1: PV Financing w/504 Loan Program Total project Cost: $1. 0 million Standard Financing Structure: Borrower Equity: $100, 000 (10%) HEDCO LDC: $400, 000 (40%) Lender: $500, 000 (50%) Total $1, 000 (100%) Estimated monthly loan payment: HEDCO LDC- SBA 504 Third-party lender Total $3, 029 (1) $5, 427 (2) $8, 456 (1) Calculation based on a gross 504 debenture of $411, 000, 20 year fully amortized loan, March’s 2011’s note rate of 4. 1538%. Rates change monthly. (2) Based on 5. 5%, 10 -year term fully amortized loan, and subject to change. Source of Borrower’s Equity Business or personal cash Loans against personal assets Seller Carry Back Note (restrictions apply) Cash credits from Federal & State energy programs (3) Federal funding limit may apply. Packaging & Decision timeframe: Completed packages received within the first week of the month, decision obtained from the HEDCO Board and SBA by the end of the month. Streamlined processing Notes: PV system expenditures incurred within 9 months prior to the date of the application may be eligible for the 504 loan program. The 504 loan has declining prepayment premium if loan is paid off before half the loan term has lapsed. A declining prepayment premium is applicable for payoffs made before half of the term loan has lapsed.

Example #2: PV Financing w/504 Loan Lending Limitation Total project Cost: $15 million Standard Financing Structure: Borrower Equity: HEDCO LDC: Lender: Total $2, 120, 000 (13. 3%) $5, 380, 000 (36. 7%) net debenture* $7, 500, 000 (50. 0%) $15, 000 (100%) Estimated monthly loan payment: HEDCO LDC- SBA 504 $ 40, 525 (1) Third-party lender $ 81, 395 (2) Total $121, 920 * The gross debenture would be $5, 499, 000 which includes the fees for the 504 loan (1) Calculation based on a 504 loan gross debenture of $5, 499, 000*, 20 -year fully amortized loan at March 2011 note rate of 4. 1538%. Rates is determined at the time of the 504 loan funding and change monthly. (2) Based on 5. 5%, 10 -year term fully amortized loan, and subject to change

The process is simple… Ø Get Ready o o Be prepared to discuss the project with your lender & HEDCO LDC If possible, have or get your company and personal financial information ready for submission to the lender Ø Get Set o o o Ø Go! o o Contact your lender Share your project information, and inform them you want HEDCO LDC-SBA 504 Loan Program’s participation Get HEDCO LDC involved early-on. You are welcome to contact us directly as well HEDCO LDC will work closely with your lender on the financing request Submit other information required to the lender and HEDCO LDC in a timely manner

HEDCO LDC…bridging the financing gap with SBA 504 loans Contact us today: David Perkins, Lori Hiramatsu or Kali Tarnay @ 521 -6502 E-mail: dperk@lava. net, lorih@lava. net, kalit@lava. net Visit our website at www. hedcoldc. com This presentation is for use by HEDCO LDC only. The information contained is subject to change. All project requests are subject to HEDCO & SBA approval.